This booklet for trustees of institutions of higher education offers guidelines for the creation of effective affiliated foundations. An introductory section notes the increased use of such foundations by public colleges and universities for institutional fund-raising and management of property and endowments. The booklet finds that successful foundations are typically responsible for 8 mission-related functions: 4 internally focused (manage resources, promote institutional flexibility, "buy time," and steward gifts); and 4 externally focused (raise money, enlist advocates, strengthen image, and protect donors' rights). Five determinants of the complexity of a foundation's mission and operations are identified: (1) budget and funding; (2) institutional history; (3) legislative definition; (4) governing board policies; and (5) autonomy needs. An organizational model based on analysis of the eight primary functions of a foundation is suggested. In addition, foundations are categorized into four models based on complexity and scope. Mandatory functions that must be carried out within the foundation are its role as "bank" and its fiduciary responsibility to donors. Finally, special cases such as institutions with multiple campuses or those with multiple foundations on the same campus are briefly considered. (DB)